2025-26 EOFY Tax Planning tips for businesses

ATO’s release of Practical Compliance Guideline PCG 2021/4 outlines the new tax compliance approach to the allocation of professional firm profits. The guidance applies to every ‘individual professional practitioner’, being an individual ‘professional’ that provides services to clients of a professional firm, or to the firm itself, and either alone or together with associates has a legal or beneficial interest in the firm.

This guidance is broad and states that a ‘professional’ is a member of any recognised profession, capturing many roles, including:

• Doctors
• Dentists
• Accountants
• Engineers
• Lawyers
• Real Estate Agents
• Architects
• Financial Advisors
• Management & Other Consultants

Optimising your business structure is crucial for ensuring efficiency, scalability, and compliance

By selecting the right structure, whether it's a sole proprietorship, partnership, company, or trust, you can better manage your tax obligations, protect your assets, and streamline operations. Each structure has its unique advantages and potential drawbacks, making it essential to evaluate which one aligns best with your business goals and circumstances.

Tax Optimisation: Is your current structure tax efficient? Consider whether the taxing point of your income is flexible and under your control. The right structure can significantly impact your tax liabilities and overall financial health.

Asset/Wealth Protection: Are your assets at risk if someone were to come after your business? Implementing the appropriate structure can help shield your personal and business assets from potential claims and liabilities

Business Succession: How difficult is it to pass your business to the next generation? Evaluate how to split business assets if there are multiple recipients and whether you are exposed to Capital Gains Tax (CGT) or if it can be avoided. Proper planning can ensure a smooth transition and minimize tax implications.

For tailored advice and to explore the options that best fit your business, contact your RSM adviser who can provide expert guidance and support.

Most businesses have payroll software that enables posting payroll expenses into the general ledger by the click of a button.

Employees are paid their net wage, but the superannuation contributions may be left in an unpaid superannuation account until the end of the month or quarter

While most expenses are eligible for deduction when incurred, superannuation is only deductible when it is paid and received, on time, by a complying superannuation fund

Superannuation contributions need to be received by the fund by the 28th day of the month following each quarter (with significant penalties for late payment). The June quarter superannuation liability is due by 28 July. Making payment before 30 June will allow your business to receive this tax deduction for the 2025 financial year, instead of the following year.

SG rate to increase on 1 July 2025

The SGC rate will increase a further 0.5% from 11.5% to 12% effective from 1 July 2025. Most payroll systems should update automatically with this adjustment, please check your system to ensure you remain compliant.

For the 2025 income tax year, the Australian government extended the instant asset write-off limit to $20,000

This means that small businesses with an aggregated turnover of less than $10 million can immediately deduct the full cost of eligible depreciating assets costing less than $20,000, provided these assets are first used installed ready for use between 1 July 2024 and 30 June 2025. This extension aims to support small businesses by allowing them to claim deductions for multiple assets under the $20,000 threshold, thereby encouraging investment in business growth and productivity.

However, for the 2026 income tax year, the instant asset write-off limit will revert to $1,000. This change means that from 1 July 2025, small businesses will only be able to write off business expenses up to the $1,000 ceiling. Assets valued at $1,000 or more will need to be depreciated over time according to the simplified depreciation rules. This adjustment marks a significant reduction in the immediate deduction limit, potentially impacting the purchasing decisions of small businesses.

In conjunction with these changes, the small business pool will continue to function as a mechanism for depreciating assets that do not qualify for the instant asset write-off. For assets costing $1,000 or more, businesses will allocate these to the small business pool and claim a 15% deduction in the first year and 30% in subsequent years. If the balance of the small business pool falls below the instant asset write-off threshold at the end of the income year, businesses can write off the entire pool balance. This ensures that small businesses can still benefit from simplified depreciation even when the instant asset write-off limit is lower.

If you have a non-paying customer and there is a genuine concern regarding recovery of the debt, then some or all of the debt can be deducted in the current tax year provided it is written off before year end and was included as income at an earlier time.

Keep in mind that you may be entitled to a reduction in GST for the bad debt written-off. If you are registered for GST and have included the forgiven amount in a prior period Business Activity Statement, you are entitled to adjust down the GST payable in the period that you write-off the bad debt. 

Businesses should review their fixed asset registers to ensure that they are not holding plant or equipment that they no longer require due to obsolescence. Even checking for assets that your business no longer holds could save you at tax time.

Depending on the written down value of the assets, a deduction can be claimed should the asset be ‘scrapped’ or disposed of prior to year-end.

It may be time to review how your business values stock on hand. Perhaps the value of closing stock used for tax purposes is based on your management accounts that uses the higher of net realisable value or cost. The ATO allows a business to value its closing stock at any of the following values:

• Replacement value
• Cost
• Market selling value

Depending on the stock valuation under these three methods a business can obtain a significant reduction in its tax liability by adopting a method that results in the lowest value.

In certain circumstances, a taxpayer may also be entitled to a deduction for a write-down of obsolete stock where appropriate valuations and measures are taken.

NOTE: Application of methods can differ for different inventory items. Liaise with your RSM Advisor to determine most suitable options for your business.
 

It is common practice for a business to create a provision for payment of staff bonuses. However, a tax deduction is only available for staff bonuses to the extent that the business is ‘definitively committed’ to paying the bonus. 

Therefore, a business looking to claim a deduction for current year bonuses should keep appropriate documentation to support approval of those bonuses prior to year-end.

Review any of your expenditure that is eligible for a discount if paid for the next year. Not only can you take advantage of this saving but depending on the expenditure it can also result in an immediate tax deduction.

Since 1 July 2020, businesses with a turnover of less than

$50 million have been eligible to deduct any prepayment that has a service period of less than 12 months and all businesses can deduct prepayments that are either required under a Government law or cost less than $1,000.

Just because you haven’t paid for goods or services until the following tax year, doesn’t mean you can’t take advantage of the deduction this year.

To the extent that services are provided to you before year end even though they are invoiced after year end, and the cost can be reasonably estimated, the expenditure may be deductible in the year in which the service was provided.

If your business holds consumable stores or spare parts that are to be used within three months after year end, the ATO’s view is that businesses can deduct the costs of consumables in the year acquired, as opposed to having to include the amount in closing stock.

It can be beneficial for businesses to review their consumables and claim upfront where possible.

If you started your small business during the current year (or will do before year end), the costs associated with starting the business will be deductible (e.g. accounting fees, legal costs, company incorporation costs and trust deed costs).